Capital One

Last week I attended Yodlee’s incubator, ynext’s Demo Day in Palo Alto. Yodlee’s ‎Chief Strategy Officer, Joe Polverari, said it decided to launch ynext to learn how to innovate better by drawing on the creativity of entrepreneurs and startups.

His words reminded me of a comment from a top venture capital firm partner that focuses on FinTech: ‘Banks are simply unable to innovate, as they are structured.’

Some have even gone further saying “banks are boring.” Recently a NY-based VC gave me a high five after I told him I’d left Morgan Stanley.

I’ve worked at both startups and banks, so know firsthand that each place can be exciting or not depending upon the role, team and culture.

It fashionable to say FinTech is booming (and seems every day I see a new post noting investment is 3X higher now than it was). The pundits praise the innovators – and predict the demise of traditional banks, citing surveys on Millennials who want to “cut the cord” with banks.

But yet the very first FinTech company was Capital One, the US bank. Its founders, Nigel Morris and Richard Fairbank, pioneered the idea of an individual credit card rate and product, putting technology at the center of its business strategy. Today Capital One’s innovation lives on in everything from its culture, products, work spaces, and units like Capital One Labs.

Having met with Capital One Labs a couple of months ago, I’ve seen first hand how the bank’s ethos, leaders (including SF-based Skip Potter) embrace innovation, creativity and Agile development.

It’s easy to forget that Merrill Lynch pioneered the Cash Management Account (not a startup); Barclays and Vanguard played big roles in revolutionizing low-cost efficient investment products like ETF’s (though robo advisors get a lot more press). In short, banks are not simply ‘desert islands’ of innovation.

EMERGE 2015

Nor are banks indifferent to the underserved. One case is point showing a focus on innovation and the underserved is next week’s EMERGE 2015 forum in Austin. This event is co-sponsored by the Center for Financial Services Innovation (CFSI) and American Banker.

The event bring 700 leaders together to network and advance innovations for the financially underserved—with consumer needs front and center.

FinTech-focused venture capital firm, CoreInnovationCapital recently wrote that “if past years are any indication, content and programming will not disappoint.”

I hope the event gets well covered in the press, but it’s too bad some fintech startups seem to garner lots of PR, no matter what their agenda.

If past years are any indication, content and programming will not disappoint at EMERGE 2015

I find it disappointing that certain startups tout solving so-called problems of engineering graduates from the nation’s most elite colleges not paying a lower rate for their loans vs. community college students.

There’s a role for credit scoring and risk-based pricing, yet we shouldn’t be fostering redlining or limiting focus on the elite. The innovators who developed new pricing for high-potential recent grads should think more about inclusion.

Case in point was a party at a venture capital firm last week in Silicon Valley. There were a lot of very smart people, connected people, and wealth – but there wasn’t a lot of diversity.

I’m positive about the positive aspects of tech firms in financial services (e.g. giving value to younger people vs. a time-in-rank culture). But we can all reach for a higher standard of serving the bottom line and so-called double bottomline.

For example, the recently announced Android Pay (like Apple Pay) is convenient, secure, but not really a game changer. Startups like LendUp or Acorns, on the other hand, show innovations can go beyond client solutions to benefit the wider society at large.